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Climate Change Policy and Combination of Multiple Policy Instruments (in Japanese)

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  • MOROTOMI Toru

Abstract

Recently, many countries have introduced economic instruments to reduce the emissions of greenhouse gases. Although Japan has been regarded as one of the most backward-looking countries for the use of economic instruments, its municipalities are now eager to introduce local environmental taxes and the ministry of environment itself announced the possible design of carbon tax in August 2003. Interesting point in this context is a tendency to use a policy instrument in combination with other instruments. In environmental economics, economic analysis of policy instruments has so far focused on each single policy instrument. However, more attention is now paid to the distributive and allocation effect of simultaneous uses of multiple policy instruments. We call it here "policy mix" of environmental policy instruments. In this paper, we first survey the discussions about such policy mix, and then try to extend the frontiers of the economic analysis of environmental policy. As a result of our analysis, the following conclusions are obtained; first, "Weitzman theorem" is still important criterion to judge which policy instrument is more appropriate under the existence of uncertainty, but its validity is limited, if marginal cost and benefit of environmental improvement are simultaneously uncertain. Second, recent proposals based on policy mix have an effect to reduce the welfare loss caused by the failures of single policy instrument. Third, the simultaneous use of price control instrument (tax) and quantity control instrument (emissions trading) gives rise to no economic inefficiency. Fourth, voluntary agreements combined with environmental tax not only improve environmental quality, but also contribute to overcome the asymmetry of information between the regulator and the regulated parties. In this context, the voluntary agreements can be regarded as a policy instrument for the regulator to acquire the information from the regulated parties effectively, and this is especially true for the Danish climate change policy. JEL Classification: H23 Key Words: Climate Change Policy, Policy Mix, Environmental Tax, Voluntary Agreement

Suggested Citation

  • MOROTOMI Toru, 2004. "Climate Change Policy and Combination of Multiple Policy Instruments (in Japanese)," ESRI Discussion paper series 111, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esj:esridp:111
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    More about this item

    Keywords

    climate change policy; policy mix; environmental tax; voluntary agreement;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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